A director of a multi-million pound construction company has handed over the keys to his £50,000 Mercedes-Benz for a Citroen Berlingo van to slash his company car tax bill.

David Butler, director of Southampton-based Dyer & Butler, says giving up his C43 AMG V8 Mercedes-Benz in favour of the 90bhp HDi Citroen van saves him more than £120 a week in tax.

Under the current tax regime, company car drivers achieve tax discounts depending on the number of business miles they drive during the financial year but next year, the level of tax will be determined by the carbon dioxide emissions of the car. However, a van driver simply pays tax based on a standard £500 charge.

Butler, a 40% taxpayer, paid tax on 25% of the P11D price of his car, creating a tax bill of about £5,000 a year, or more than £400 a month.

His benefit charge for the sporty Mercedes-Benz would have increased to 35% of its P11D price under the CO2-based tax regime being introduced from April next year, but shifting to a van slashed his tax bill to just £200 a year, or £3.80 a week.

Butler runs a fleet of 100 vehicles, 50 light commercial vehicles and 50 cars, and already two other staff have swapped from cars to vans for tax reasons.

He said: "If the tax man came to your door and took more than £120 in cash off you every week for having a car, then you would get rid of it straight away. It just did not seem right to me. With public roads the way they are, you go just as fast in a traffic jam in a van as you do in a Mercedes-Benz."